Distributional impact of tax and welfare policies: COVID-related policies and Budget 2021
Citation:
Karina Doorley, Claire Keane, Alyvia McTague, Seamus O'Malley, Mark Regan, Barra Roantree, Dora Tuda, Distributional impact of tax and welfare policies: COVID-related policies and Budget 2021, QEC Special Article, The Economic and Social Research Institute, December, 2020, 1 - 18Download Item:
Abstract:
In this article, we assess the impact of the COVID-19 pandemic on unemployment
in Ireland and estimate how family incomes have changed as a result of increased
unemployment, calibrated to administrative sources for end-August. We then
show how the direct and indirect tax and welfare measures enacted prior to
Budget 2021 have helped to cushion pandemic-related income losses. Lastly, we
assess the impact of Budget 2021 measures.
We find that pandemic-related unemployment could have decreased household
income by an average of 7 per cent across the population, with significantly larger
losses for those who lost their jobs. Thanks to the initial policy response in the form
of the PUP, wage subsidy and standard rate VAT cut, household income fell instead
by 3 per cent on average. These losses are sharpest at the upper end of the income
distribution, for the young, and for those in certain hard-hit sectors such as
hospitality. The impact of Budget 2021, while less costly than the pre-budget
measures, is similar in pattern, with above average gains for the bottom two-fifths
of the income distribution and lower than average gains for those at the upper end.
Without these interventions, income inequality would have increased
substantially. Instead, our simulations suggest that the COVID-related
interventions stabilised disposable income inequality, a significant feat given the
job losses experienced. At risk of poverty rates were also stabilised by COVID-
related policies but there is a risk that these indices may increase significantly once
these supports are withdrawn. We conclude with some brief reflections on some
of the challenges facing the government in the coming years.
Author's Homepage:
http://people.tcd.ie/broantreDescription:
PUBLISHED
Author: Roantree, Barra
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The Economic and Social Research InstituteType of material:
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QEC Special Article;Availability:
Full text availableSubject (TCD):
Inclusive SocietyDOI:
https://doi.org/10.26504/qec2020win_sa_doorleyMetadata
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